EXHIBIT 10.2
EXHIBIT 1.1A
FORM OF INVESTOR PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") is entered into as of
April 10, 2001 among M-FOODS DAIRY HOLDINGS, LLC, a Delaware limited liability
company (the "OBLIGOR") and BANK OF AMERICA, N.A., in its capacity as agent (in
such capacity, the "AGENT") for the lenders from time to time party to the
Credit Agreement described below (the "LENDERS").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "CREDIT AGREEMENT") among Michael Foods, Inc., a Minnesota corporation (the
"Borrower"), M-Foods Holdings, Inc., a Delaware corporation (the "PARENT") and
certain Subsidiaries of the Parent (individually a "GUARANTOR", and collectively
the "GUARANTORS"), the Lenders, the Agent and Bear, Stearns & Co., as
Syndication Agent, the Lenders have agreed to make Loans and issue or
participate in Letters of Credit upon the terms and subject to the conditions
set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Obligor shall
have executed and delivered this Pledge Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to such terms in the Credit Agreement.
For purposes of this Pledge Agreement, the term "Lender" shall include, as of
any date of determination, any Affiliate of any Lender which is party to a
Hedging Agreement with any Credit Party.
2. PLEDGE AND GRANT OF SECURITY INTEREST. To secure the prompt
payment and performance in full when due, whether by lapse of time or otherwise,
of the Obligor Obligations (as defined in Section 3 hereof), the Obligor hereby
pledges and assigns to the Agent, for the ratable benefit of the Lenders, and
grants to the Agent, for the ratable benefit of the Lenders, a continuing
security interest in any and all right, title and interest of the Obligor in and
to the following, whether now owned or existing or owned, acquired, or arising
hereafter (collectively, the "PLEDGED COLLATERAL"):
(a) PLEDGED SHARES. (i) 100% (or, if less, the full
amount owned by the Obligor) of the issued and outstanding shares of
Capital Stock of Dairy LLC, and (ii) 100% (or, if less, the full amount
owned by the Obligor) of the issued and outstanding shares of Capital
Stock of Dairy TXCT LLC, in each case, together with the certificates
(or other agreements or instruments), if any, representing such Capital
Stock, and all options and other rights, contractual or otherwise, with
respect thereto (collectively, together with the shares of Capital
Stock described in Section 2(b) below, the "PLEDGED SHARES"),
including, but not limited to, the following:
(y) all shares or securities representing a
dividend on any of the Pledged Shares, or representing a
distribution or return of capital upon or in respect of the
Pledged Shares, or resulting from a stock split, revision,
reclassification or other exchange therefor, and any
subscriptions, warrants, rights or options issued to the
holder of, or otherwise in respect of, the Pledged Shares; and
(z) without affecting the obligations of the
Obligor under any provision prohibiting such action hereunder
or under the Credit Agreement, in the event of any
consolidation or merger involving the issuer of any Pledged
Shares and in which such issuer is not the surviving
corporation, all shares of each class of the Capital Stock of
the successor resulting from such consolidation or merger
payable to or received by the Obligor as consideration for
such merger.
(b) PROCEEDS. All proceeds and products of the foregoing,
however and whenever acquired and in whatever form.
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that the Obligor may from time to time
hereafter deliver additional Capital Stock to the Agent as collateral security
for the Obligor Obligations. Upon delivery to the Agent, such additional Capital
Stock shall be deemed to be part of the Pledged Collateral of the Obligor and
shall be subject to the terms of this Pledge Agreement.
3. SECURITY FOR OBLIGOR OBLIGATIONS. The security interest
created hereby in the Pledged Collateral of the Obligor constitutes continuing
collateral security for all of the Credit Party Obligations, now existing or
hereafter arising pursuant to the Credit Documents, owing from the Borrower or
any other Credit Party to any Lender or the Agent, howsoever evidenced, created,
incurred or acquired, whether primary, secondary, direct, contingent, or joint
and several, including, without limitation, all liabilities arising under
Hedging Agreements between any Credit Party and any Lender and all obligations
and liabilities incurred in connection with collecting and enforcing the
foregoing (collectively, the "OBLIGOR OBLIGATIONS").
4. DELIVERY OF THE PLEDGED COLLATERAL. The Obligor hereby agrees
that:
(a) The Obligor shall deliver to the Agent (i)
simultaneously with or prior to the execution and delivery of this
Pledge Agreement, all certificates representing the Pledged Shares of
such Obligor and (ii) promptly upon the receipt thereof by or on behalf
of the Obligor, all other certificates and instruments constituting
Pledged Collateral of the Obligor. Prior to delivery to the Agent, all
such certificates and instruments constituting Pledged Collateral of
the Obligor shall be held in trust by the Obligor for the benefit of
the Agent pursuant hereto. All such certificates shall be delivered in
suitable form for
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transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, substantially in the
form provided in EXHIBIT 4(a) attached hereto.
(b) ADDITIONAL SECURITIES. If the Obligor shall receive
by virtue of its being or having been the owner of any Pledged
Collateral, any (i) stock certificate, including without limitation,
any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reclassification,
merger, consolidation, sale of assets, combination of equity interests,
stock splits, spin-off or split-off, promissory notes or other
instrument; (ii) option or right, whether as an addition to,
substitution for, or an exchange for, any Pledged Collateral or
otherwise; (iii) dividends payable in securities; or (iv) distributions
of securities in connection with a partial or total liquidation,
dissolution or reduction of capital, capital surplus or paid-in
surplus, then the Obligor shall receive such stock certificate,
instrument, option, right or distribution in trust for the benefit of
the Agent, shall segregate it from the Obligor's other property and
shall deliver it forthwith to the Agent in the exact form received
together with any necessary endorsement and/or appropriate stock power
duly executed in blank, substantially in the form provided in EXHIBIT
4(a), to be held by the Agent as Pledged Collateral and as further
collateral security for the Obligor Obligations.
(c) FINANCING STATEMENTS. The Obligor shall execute and
deliver to the Agent such UCC or other applicable financing statements
as may be reasonably requested by the Agent in order to perfect and
protect the security interest created hereby in the Pledged Collateral
of the Obligor.
5. REPRESENTATIONS AND WARRANTIES. The Obligor hereby represents
and warrants to the Agent, for the benefit of the Lenders, that:
(a) AUTHORIZATION OF PLEDGED SHARES. The Pledged Shares
are duly authorized and validly issued, are fully paid and (to the
extent such concept is applicable) nonassessable and are not subject to
the preemptive rights of any Person. All other Capital Stock
constituting Pledged Collateral will be duly authorized and validly
issued, fully paid and (to the extent such concept is applicable)
nonassessable and not subject to the preemptive rights of any Person.
(b) TITLE. The Obligor has good and indefeasible title to
the Pledged Collateral of the Obligor and will at all times be the
legal and beneficial owner of such Pledged Collateral free and clear of
any Lien, other than Permitted Liens. There exists no "adverse claim"
within the meaning of Section 8-302 of the Uniform Commercial Code as
in effect in the State of New York as of the date hereof (the "UCC")
with respect to the Pledged Shares of the Obligor.
(c) EXERCISING OF RIGHTS. Subject to compliance with
applicable laws affecting the offering and sale of securities, the
exercise by the Agent of its rights and remedies hereunder will not
violate any material law or governmental regulation or any material
contractual restriction binding on or affecting the Obligor or any of
its property.
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(d) OBLIGOR'S AUTHORITY. No authorization, approval or
action by, and no notice or filing with any Governmental Authority or
with the issuer of any Pledged Stock is required either (i) for the
pledge made by the Obligor or for the granting of the security interest
by the Obligor pursuant to this Pledge Agreement or (ii) for the
exercise by the Agent or the Lenders of their non-judicial foreclosure
rights and remedies hereunder (except as may be required by laws
affecting the offering and sale of securities). This Pledge Agreement
has been duly executed and delivered on behalf of the Obligor. This
Pledge Agreement constitutes a legal, valid and binding obligation of
the Obligor enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in
equity or at law) and by an implied covenant of good faith and fair
dealing.
(e) SECURITY INTEREST/PRIORITY. This Pledge Agreement
creates a valid security interest in favor of the Agent, for the
ratable benefit of the Lenders, in the Pledged Collateral. The taking
possession by the Agent of the certificates representing any
certificated Pledged Shares and all other certificates and instruments
constituting Pledged Collateral will perfect and establish the first
priority of the Agent's security interest in such Pledged Shares and,
when properly perfected by filing or registration, in all other Pledged
Collateral securing the Obligor Obligations. Except as set forth in
this Section 5(e), no action is necessary to perfect or otherwise
protect such security interest.
(f) NO OTHER SHARES. As of the Closing Date, the Obligor
owns no other Captial Stock of Dairy LLC or Dairy TXCT LLC other than
as set forth on SCHEDULE 5(f) attached hereto.
(g) PARTNERSHIP AND LIMITED LIABILITY COMPANY INTERESTS.
Except as previously disclosed to the Agent, none of the Pledged Shares
(i) is dealt in or traded on a securities exchange or in a securities
market, (ii) by its terms expressly provides that it is a security
governed by Article 8 of the UCC, (iii) is an investment company
security or (iv) is held in a securities account.
(h) ORGANIZATION AND GOOD STANDING. The Obligor (i) is
duly organized, validly existing and is in good standing under the laws
of the jurisdiction of its organization, (ii) has the necessary power
and authority, and the legal right, to own and operate its property and
to conduct the business in which it is currently engaged and (iii) is
duly qualified as a foreign entity and in good standing under the laws
of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification,
other than in such jurisdictions where the failure to be so qualified
and in good standing would not have a Material Adverse Effect.
(i) NO CONFLICTS. Neither the execution and delivery of
this Pledge Agreement, nor the consummation of the transactions
contemplated therein, nor performance of and compliance with the terms
and provisions thereof by the Obligor will (i) violate or conflict with
any provision of its articles or certificate of formation, operating
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agreement or other organizational or governing documents, (ii) violate,
contravene or materially conflict with any material Requirement of Law
or any other material law, regulation (including, without limitation,
Regulation U or Regulation X), order, writ, judgment, injunction,
decree or permit applicable to it, (iii) violate, contravene or
conflict with contractual provisions of, or cause an event of default
under, any indenture, loan agreement, mortgage, deed of trust, contract
or other agreement or instrument to which it is a party or by which it
may be bound, the violation of which could reasonably be expected to
have a Material Adverse Effect, or (iv) result in or require the
creation of any Lien (other than those contemplated in or created in
connection with the Credit Documents) upon or with respect to its
properties.
6. COVENANTS. The Obligor hereby covenants that, until such time
as this Pledge Agreement has been terminated in accordance with the terms of
Section 14(a), the Obligor shall:
(a) BOOKS AND RECORDS. Mark its books and records (and
shall cause the issuer of the Pledged Shares of the Obligor to mark its
books and records) to reflect the security interest granted to the
Agent, for the ratable benefit of the Lenders, pursuant to this Pledge
Agreement.
(b) DEFENSE OF TITLE. Warrant and defend title to and
ownership of the Pledged Collateral of the Obligor at the expense of
the Borrower against the claims and demands of all other parties
claiming an interest therein, keep the Pledged Collateral free from all
Liens, except for Liens of the same type as Permitted Liens, and not
sell, exchange, transfer, assign, lease or otherwise dispose of Pledged
Collateral of the Obligor or any interest therein, except as permitted
under the Credit Agreement and the other Credit Documents.
(c) FURTHER ASSURANCES. Promptly execute and deliver at
its expense all further instruments and documents and take all further
action that may be reasonably necessary or that the Agent may
reasonably request in order to (i) perfect and protect the security
interest created hereby in the Pledged Collateral of the Obligor
(including without limitation any and all actions necessary to satisfy
the Agent that the Agent has obtained a first priority perfected
security interest in any Pledged Shares); (ii) enable the Agent to
exercise and enforce its rights and remedies hereunder in respect of
the Pledged Collateral of the Obligor; and (iii) otherwise effect the
purposes of this Pledge Agreement.
(d) AMENDMENTS. Not make or consent to any amendment or
other modification or waiver with respect to any of the Pledged
Collateral of the Obligor or enter into any agreement or allow to exist
any restriction with respect to any of the Pledged Collateral of the
Obligor other than pursuant hereto or as may be permitted under the
Credit Agreement.
(e) COMPLIANCE WITH SECURITIES LAWS. File all reports and
other information now or hereafter required to be filed by the Obligor
with the United States Securities and
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Exchange Commission and any other state, federal or foreign agency in
connection with the ownership of the Pledged Collateral of the Obligor.
(f) CERTAIN MONIES TO BE HELD IN TRUST. In the event that
the Obligor receives (i) any Net Cash Proceeds from an Asset
Disposition of (A) the Capital Stock of Dairy LLC or Dairy TXCT LLC or
(B) any of the Property of Dairy LLC or Dairy TXCT LLC which are not
immediately distributed to a Credit Party or (ii) any Restricted
Payment from Dairy LLC or Dairy TXCT LLC in violation of the Credit
Agreement, such Net Cash Proceeds or Restricted Payment, as applicable,
shall (i) unless a Bankruptcy Event shall have occurred with respect to
any Consolidated Party, be distributed to the Credit Parties in the
manner specified in Section 8.7 of the Credit Agreement or (ii) if a
Bankruptcy Event shall have occurred with respect to any Consolidated
Party, be held by the Obligor in trust for the benefit of, and shall be
paid forthwith over and delivered, upon written request, to the Agent,
for application to the payment of the Credit Party Obligations in
accordance with the terms of the Credit Agreement.
7. ADVANCES BY LENDERS. On failure of the Obligor to perform any
of the covenants and agreements contained herein and upon written notice to the
Obligor, the Agent may, at its sole option and in its sole discretion, perform
the same and in so doing may expend such sums as the Agent may reasonably deem
advisable in the performance thereof, including, without limitation, the payment
of any insurance premiums, the payment of any taxes, a payment to obtain a
release of a Lien or potential Lien (other than Permitted Liens), expenditures
made in defending against any adverse claim and all other expenditures which the
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Borrower promptly upon timely notice thereof
and demand therefor, shall constitute additional Obligor Obligations and shall
bear interest from the date said amounts are expended at the default rate
specified in SECTION 3.1 of the Credit Agreement for Revolving Loans that are
Base Rate Loans. No such performance of any covenant or agreement by the Agent
or the Lenders on behalf of the Obligor, and no such advance or expenditure
therefor, shall relieve the Obligor of any default under the terms of this
Pledge Agreement. The Agent may make any payment hereby authorized in accordance
with any bill, statement or estimate procured from the appropriate public office
or holder of the claim to be discharged without inquiry into the accuracy of
such bill, statement or estimate or into the validity of any tax assessment,
sale, forfeiture, tax lien, title or claim except to the extent such payment is
being contested in good faith by the Obligor or the Borrower in appropriate
proceedings and against which adequate reserves are being maintained in
accordance with GAAP.
8. EVENTS OF DEFAULT. The occurrence of an event which under the
Credit Agreement would constitute an Event of Default shall be an Event of
Default hereunder (an "EVENT OF DEFAULT").
9. REMEDIES.
(a) GENERAL REMEDIES. Upon the occurrence of an Event of
Default and during the continuation thereof, the Agent and the Lenders
shall have, in respect of the Pledged Collateral of the Obligor, in
addition to the rights and remedies provided herein,
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in the Credit Documents, in any Hedging Agreement between any Credit
Party and any Lender, or by law, the rights and remedies of a secured
party under the UCC or any other applicable law.
(b) SALE OF PLEDGED COLLATERAL. Upon the occurrence of an
Event of Default and during the continuation thereof, without limiting
the generality of this Section and without notice, the Agent may, at
the direction of the Required Lenders, sell or otherwise dispose of or
realize upon the Pledged Collateral, or any part thereof, in one or
more parcels, at public or private sale, at any exchange or broker's
board or elsewhere, at such price or prices and on such other terms as
the Agent may deem commercially reasonable, for cash, credit or for
future delivery or otherwise in accordance with applicable law. To the
extent permitted by law, any Lender may in such event, bid for the
purchase of such securities. The Obligor agrees that, to the extent
notice of sale shall be required by law and has not been waived by the
Obligor, any requirement of reasonable notice shall be met if notice,
specifying the place of any public sale or the time after which any
private sale is to be made, is personally served on or mailed, postage
prepaid, to the Borrower and the Obligor, in accordance with the notice
provisions of Section 17 hereof at least 10 days before the time of
such sale (or such longer period as may be required under applicable
law). The Agent shall not be obligated to make any sale of Pledged
Collateral of the Obligor regardless of notice of sale having been
given. The Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
(c) PRIVATE SALE. Upon the occurrence of an Event of
Default and during the continuation thereof, the Obligor recognizes
that the Agent may deem it impracticable to effect a public sale of all
or any part of the Pledged Shares or any of the securities constituting
Pledged Collateral and that the Agent may at the direction of the
Required Lenders, therefore, determine to make one or more private
sales of any such securities to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to
the distribution or resale thereof. The Obligor acknowledges that any
such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained
at a public sale and, notwithstanding the foregoing, agrees that such
private sale shall be deemed to have been made in a commercially
reasonable manner and that the Agent shall have no obligation to delay
sale of any such securities for the period of time necessary to permit
the issuer of such securities to register such securities for public
sale under the Securities Act of 1933, as amended. The Obligor further
acknowledges and agrees that any offer to sell such securities which
has been (i) publicly advertised on a bona fide basis in a newspaper or
other publication of general circulation in the financial community of
New York, New York (to the extent that such offer may be advertised
without prior registration under the Securities Act of 1933), or (ii)
made privately in the manner described above shall be deemed to involve
a "public sale" under the UCC, notwithstanding that such sale may not
constitute a "public offering" under the Securities Act of 1933, and
the Agent may, in such event, bid for the purchase of such securities.
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(d) RETENTION OF PLEDGED COLLATERAL. In addition to the
rights and remedies hereunder, upon the occurrence and during the
continuance of an Event of Default, the Agent may, at the direction of
the Required Lenders, after providing the notices required by Section
9-505(2) of the UCC or otherwise complying with the requirements of
applicable law of the relevant jurisdiction, retain all or any portion
of the Pledged Collateral in satisfaction of the Obligor Obligations.
Unless and until the Agent shall have provided such notices, however,
the Agent shall not be deemed to have retained any Pledged Collateral
in satisfaction of any Obligor Obligations for any reason.
(e) MANNER OF EXERCISE OF REMEDIES. (i) Notwithstanding
anything herein to the contrary and to the extent not prohibited by
applicable law, the Agent shall not foreclose on, sell or pursue any
remedies in respect of any Capital Stock of Dairy LLC pledged to the
Agent (all of such Capital Stock, the "Total Pledged Dairy LLC
Collateral") by the pledgors (collectively, the "Dairy LLC Pledgors")
under or pursuant to either of the Investor Pledge Agreement and the
Pledge Agreement (as defined in the Credit Agreement) (collectively,
the "Pledge Agreements") unless the Agent sells, forecloses on, or
pursues remedies in respect of all of such Total Pledged Dairy LLC
Collateral. To the extent not prohibited by applicable law, the Agent
shall not foreclose on or sell any portion of the Total Pledged Dairy
LLC Collateral of a particular class owned by a particular Dairy LLC
Pledgor unless the Agent forecloses on or sells the Total Pledged Dairy
LLC Collateral of such class (based upon the number of shares owned by
a particular Dairy LLC Pledgor and the total number of shares of such
class which are pledged to the Agent) owned by all Dairy LLC Pledgors
on a pro rata basis.
(ii) Notwithstanding anything herein to the contrary and
to the extent not prohibited by applicable law, the Agent shall not
foreclose on, sell or pursue any remedies in respect of any Capital
Stock of Dairy TXCT LLC pledged to the Agent (all of such Capital
Stock, the "Total Pledged Dairy TXCT LLC Collateral") by the pledgors
(collectively, the " Dairy TXCT LLC Pledgors") under or pursuant to
either of the Pledge Agreements unless the Agent sells, forecloses on,
or pursues remedies in respect of all of such Total Pledged Dairy TXCT
LLC Collateral. To the extent not prohibited by applicable law, the
Agent shall not foreclose on or sell any portion of the Total Pledged
Dairy TXCT LLC Collateral of a particular class owned by a particular
Dairy TXCT LLC Pledgor unless the Agent forecloses on or sells the
Total Pledged Dairy TXCT LLC Collateral of such class (based upon the
number of shares owned by a particular Dairy TXCT LLC Pledgor and the
total number of shares of such class which are pledged to the Agent)
owned by all Dairy TXCT LLC Pledgors on a pro rata basis.
(f) NO DEFICIENCY; LIMITATION ON RECOURSE. EXCEPT AS
OTHERWISE PROVIDED IN SECTION 6(f), NOTWITHSTANDING ANY OTHER PROVISION
TO THE CONTRARY CONTAINED IN THIS PLEDGE AGREEMENT OR ELSEWHERE, THE
AGENT'S AND THE LENDERS' RIGHTS PURSUANT TO THIS PLEDGE AGREEMENT ARE
LIMITED TO THE PLEDGED COLLATERAL, AND THE AGENT'S AND THE LENDERS'
SOLE RECOURSE WITH RESPECT TO THE OBLIGOR TO SATISFY THE
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OBLIGOR OBLIGATIONS SHALL BE TO EXERCISE REMEDIES WITH RESPECT TO THE
PLEDGED COLLATERAL. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING
THE OBLIGOR SHALL NOT BE LIABLE FOR ANY DEFICIENCY IF THE PROCEEDS OF
ANY DISPOSITION OF THE PLEDGED COLLATERAL IS INSUFFICIENT TO SATISFY
THE OBLIGOR OBLIGATIONS. Except as otherwise provided in Section 6(f),
the Obligor shall have no personal liability under this Pledge
Agreement or any other Credit Documents or any other document for the
Obligor Obligations, and no recourse (except as provided in Section
6(f) and the first sentence of this paragraph) for the payment of any
amount due under this Pledge Agreement, for the Obligor Obligations or
for any claim arising out of this Pledge Agreement or the Credit
Documents, whether for failure to pay, perform or discharge any
monetary or non-monetary obligation, breaches of representations,
warranties or covenants, the occurrence of defaults or otherwise, shall
be had against (i) the Obligor, (ii) any past, present or future
equityholder, officer, director or Affiliate (other than Consolidated
Parties), as such, of (A) the Obligor, or (B) any successor to the
Obligor, (iii) any direct or indirect parent of the Obligor, (iv) any
other Subsidiary or Affiliate of any such direct or indirect parent
(other than Consolidated Parties), or (v) any incorporator, member,
equityholder, officer or director, as such, of any such parent or other
Subsidiary or Affiliate (other than Consolidated Parties). Any surplus
remaining after the full payment and satisfaction of the Obligor
Obligations shall be returned to the Obligor or to whomsoever a court
of competent jurisdiction shall determine to be entitled thereto.
10. RIGHTS OF THE AGENT.
(a) POWER OF ATTORNEY. In addition to other powers of
attorney contained herein, the Obligor hereby designates and appoints
the Agent, on behalf of the Lenders, and each of its designees or
agents as attorney-in-fact of the Obligor, irrevocably and with power
of substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuance of an Event of
Default and subject to clause (d) below with respect to voting rights:
(i) to demand, collect, settle, compromise,
adjust and give discharges and releases concerning the Pledged
Collateral of the Obligor, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any of the Pledged
Collateral of the Obligor and enforcing any other right in
respect thereof;
(iii) to defend, settle or compromise any action
or proceeding brought and, in connection therewith, give such
discharges or releases as the Agent may deem reasonably
appropriate;
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(iv) to pay or discharge taxes, liens, security
interests, or other encumbrances levied or placed on or
threatened against the Pledged Collateral of the Obligor;
(v) to direct any parties liable for any payment
under any of the Pledged Collateral to make payment of any and
all monies due and to become due thereunder directly to the
Agent or as the Agent shall direct;
(vi) to receive payment of and receipt for any
and all monies, claims, and other amounts due and to become
due at any time in respect of or arising out of any Pledged
Collateral of the Obligor;
(vii) to sign and endorse any drafts, assignments,
proxies, stock powers, verifications, notices and other
documents relating to the Pledged Collateral of the Obligor;
(viii) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, pledge agreements, affidavits, notices
and other agreements, instruments and documents that the Agent
may reasonably determine necessary in order to perfect and
maintain the security interests and liens granted in this
Pledge Agreement and in order to fully consummate all of the
transactions contemplated therein;
(ix) to exchange any of the Pledged Collateral of
the Obligor or other property upon any merger, consolidation,
reorganization, recapitalization or other readjustment of the
issuer thereof and, in connection therewith, deposit any of
the Pledged Collateral of the Obligor with any committee,
depository, transfer agent, registrar or other designated
agency upon such terms as the Agent may reasonably determine;
(x) to vote for a shareholder resolution, or to
sign an instrument in writing, sanctioning the transfer of any
or all of the Pledged Shares of the Obligor into the name of
the Agent or one or more of the Lenders or into the name of
any transferee to whom the Pledged Shares of the Obligor or
any part thereof may be sold pursuant to Section 10 hereof;
and
(xi) to do and perform all such other acts and
things as the Agent may reasonably deem to be necessary,
proper or convenient in connection with the Pledged Collateral
of the Obligor.
This power of attorney is a power coupled with an interest and shall be
irrevocable until this Pledge Agreement has been terminated in
accordance with the term of Section 14(a). The Agent shall be under no
duty to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in
this Pledge Agreement, and shall not be liable for any failure to do so
or any delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any
10
mistake of fact or law in its individual capacity or its capacity as
attorney-in-fact except acts or omissions resulting from its gross
negligence, bad faith or willful misconduct. This power of attorney is
conferred on the Agent solely to protect, preserve and realize upon its
security interest in Pledged Collateral.
(b) ASSIGNMENT BY THE AGENT. The Agent may from time to
time assign the Obligor Obligations and the Pledged Collateral to any
successor Agent appointed in accordance with SECTION 10.7 of the Credit
Agreement, and the assignee shall be entitled to all of the rights and
remedies of the Agent under this Pledge Agreement in relation thereto.
(c) THE AGENT'S DUTY OF CARE. Other than the exercise of
reasonable care to assure the safe custody of the Pledged Collateral
while being held by the Agent hereunder and the accounting of monies
actually received hereunder, the Agent shall have no duty or liability
to preserve rights pertaining thereto, it being understood and agreed
that Obligor shall be responsible for preservation of all rights in the
Pledged Collateral of the Obligor, and the Agent shall be relieved of
all responsibility for Pledged Collateral upon surrendering it or
tendering the surrender of it to the Obligor. The Agent shall be deemed
to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if such Pledged Collateral is
accorded treatment substantially equal to that which the Agent accords
its own property, which shall be no less than the treatment employed by
a reasonable and prudent agent in the industry, it being understood
that the Agent shall not have responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged
Collateral, whether or not the Agent has or is deemed to have knowledge
of such matters; or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
(d) VOTING RIGHTS IN RESPECT OF THE PLEDGED COLLATERAL.
(i) So long as no Event of Default shall have
occurred and be continuing, to the extent permitted by law,
the Obligor may exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral of the
Obligor or any part thereof for any purpose not inconsistent
with the terms of this Pledge Agreement or the Credit
Agreement; and
(ii) Upon the occurrence and during the
continuance of an Event of Default, all rights of the Obligor
to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to paragraph
(i) of this Section upon written notice to the Borrower and
the Obligor shall cease and all such rights shall thereupon
become vested in the Agent which shall then have the sole
right to exercise such voting and other consensual rights.
(e) DIVIDEND RIGHTS IN RESPECT OF THE PLEDGED COLLATERAL.
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(i) Subject to subclause (ii) below and subject
to Section 4(b) hereof, the Obligor may receive and retain any
and all dividends (other than stock dividends and other
dividends constituting Pledged Collateral which are addressed
hereinabove) or interest paid in respect of the Pledged
Collateral to the extent they are allowed under the Credit
Agreement.
(ii) Upon the occurrence and during the
continuance of an Event of Default (but subject to the
provisions of the Credit Agreement):
(A) all rights of the Obligor to
receive the dividends and interest payments which it
would otherwise be authorized to receive and retain
pursuant to paragraph (i) of this Section upon
written notice to the Borrower and the Obligor shall
cease and all such rights shall thereupon be vested
in the Agent which shall then have the sole right to
receive and hold as Pledged Collateral such dividends
and interest payments; and
(B) all dividends and interest payments
which are received by the Obligor contrary to the
provisions of paragraph (A) of this Section shall be
received in trust for the benefit of the Agent, shall
be segregated from other property or funds of the
Obligor, and shall be forthwith paid over to the
Agent as Pledged Collateral in the exact form
received, to be held by the Agent as Pledged
Collateral and as further collateral security for the
Obligor Obligations.
(f) RELEASE OF PLEDGED COLLATERAL. The Agent may release
any of the Pledged Collateral from this Pledge Agreement or may
substitute any of the Pledged Collateral for other Pledged Collateral
without altering, varying or diminishing in any way the force, effect,
lien, pledge or security interest of this Pledge Agreement as to any
Pledged Collateral not expressly released or substituted.
11. RIGHTS OF REQUIRED LENDERS. To the extent (i) the Agent has
refused to exercise any of its rights hereunder at the direction of the Required
Lenders or (ii) the Agent has resigned or has been removed pursuant to Section
10.7 of the Credit Agreement and no successor Agent has been appointed, all
rights of the Agent hereunder may be exercised by the Required Lenders.
12. APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Obligor
Obligations and any proceeds of any Pledged Collateral, when received by the
Agent or any of the Lenders in cash or its equivalent, will be applied in
reduction of the Obligor Obligations in the order set forth in SECTION 3.15(b)
of the Credit Agreement, and the Obligor irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
the Agent shall have the continuing and exclusive right to apply and reapply any
and all such payments and proceeds in the Agent's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
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13. EXPENSES. The Borrower agrees to promptly pay upon demand any
and all reasonable documented costs and expenses of the Agent or the Lenders as
necessary to protect the Pledged Collateral or to exercise any rights or
remedies under this Pledge Agreement or with respect to any Pledged Collateral,
subject to the same terms and conditions applicable to Credit Parties under
SECTION 11.5 of the Credit Agreement.
14. CONTINUING AGREEMENT.
(a) This Pledge Agreement shall be a continuing agreement
in every respect and shall remain in full force and effect until the
earlier of (i) such time as the Credit Party Obligations are Fully
Satisfied or (ii) such time as all of Net Cash Proceeds from the sales
of the Capital Stock of Dairy LLC and Dairy TXCT LLC to one or more
Persons who are not Affiliates of the Borrower pursuant to Permitted
Asset Dispositions have been irrevocably delivered to the Credit
Parties. At such time, this Pledge Agreement and the liens and security
interests created hereunder shall automatically terminate and the Agent
and the Lenders shall, at the expense of the Obligor, redeliver all
Pledged Shares to the Obligor and shall execute and deliver all UCC
termination statements and/or other documents reasonably requested by
the Obligor evidencing such termination. Any other releases of Pledged
Collateral prior to the termination of this Pledge Agreement shall be
made pursuant to Section 8.5 of the Credit Agreement. Notwithstanding
the foregoing all indemnities provided hereunder shall survive
termination of this Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective
or be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Obligor Obligations is
rescinded or must otherwise be restored or returned by the Agent or any
Lender as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had
not been made; PROVIDED that in the event payment of all or any part of
the Obligor Obligations is rescinded or must be restored or returned,
all reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent in
defending and enforcing such reinstatement shall be deemed to be
included as a part of the Obligor Obligations.
15. AMENDMENTS; WAIVERS; MODIFICATIONS. This Pledge Agreement and
the provisions hereof may not be amended, waived, modified, changed, discharged
or terminated unless such amendment, waiver, modification, change, discharge or
termination is in writing entered into, or approved in writing, by the Agent and
the Obligor.
16. SUCCESSORS IN INTEREST. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon the
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their successors and permitted assigns; PROVIDED, HOWEVER,
that the Obligor may not assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement.
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17. NOTICES. Except as otherwise expressly provided herein, all
notices and other communications shall have been duly given and shall be
effective (a) when delivered, (b) when transmitted via telecopy (or other
facsimile device) to the number set out below, (c) the Business Day following
the day on which the same has been delivered prepaid (or pursuant to an invoice
arrangement) to a reputable national overnight air courier service, or (d) the
third Business Day following the day on which the same is sent by certified or
registered mail, postage prepaid, in each case to the respective parties at the
address, in the case of the Obligor, set forth below, and, in the case of the
Agent, set forth on SECTION 11.1 of the Credit Agreement, or at such other
address as such party may specify by written notice to the other parties hereto:
if to the Obligor:
Vestar Capital Partners
1225 Seventeenth Street
Suite 1660
Denver, CO 80202
Attn: Chris Henderson, Managing Director
Telephone: (303) 294-1822
Telecopy: (303) 292-6639
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Steve Ritchie
Telephone: (312) 861-2210
Telecopy: (312) 861-2200.
18. COUNTERPARTS. This Pledge Agreement may be executed in any
number of counterparts, each of which where so executed and delivered shall be
an original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
19. HEADINGS. The headings of the sections and subsections hereof
are provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
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20. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any
legal action or proceeding with respect to this Pledge Agreement may be
brought in the courts of the State of New York in New York County, or
of the United States for the Southern District of New York, and, by
execution and delivery of this Pledge Agreement, the Obligor hereby
irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of such courts. Each
Obligor further irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to Section 17
hereof, such service to become effective 30 days after such mailing.
Nothing herein shall affect the right of the Agent to serve process in
any other manner permitted by law or to commence legal proceedings or
to otherwise proceed against the Obligor in any other jurisdiction.
(b) The Obligor hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Pledge Agreement brought in the courts referred to in subsection
(a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
21. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS PLEDGE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
22. SEVERABILITY. If any provision of any of the Pledge Agreement
is determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
23. ENTIRETY. This Pledge Agreement represents the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any.
24. SURVIVAL. All representations and warranties of the Obligor
hereunder shall survive the execution and delivery of this Pledge Agreement.
25. OTHER SECURITY. To the extent that any of the Obligor
Obligations are now or hereafter secured by property other than the Pledged
Collateral (including, without limitation, real and other personal property
owned by the Obligor), or by a guarantee, endorsement or property of any other
Person, then the Agent and the Lenders shall have the right to proceed
15
against such other property, guarantee or endorsement upon the occurrence and
during the continuance of any Event of Default, and the Agent and the Lenders
have the right, in their sole discretion, to determine which rights, security,
liens, security interests or remedies the Agent and the Lenders shall at any
time pursue, relinquish, subordinate, modify or take with respect thereto,
without in any way modifying or affecting any of them or any of the Agent's and
the Lenders' rights or the Obligor Obligations under this Pledge Agreement,
under any other of the Credit Documents or under any Hedging Agreement between
any Credit Party and any Lender.
[remainder of page intentionally left blank]
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Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
OBLIGOR: M-FOODS DAIRY HOLDINGS, LLC
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Acknowledged and consented to as of the date first above written.
M-FOODS DAIRY, LLC
By:
-----------------------------------------
Name: John D. Reedy
Title: V.P. - Finance and C.F.O.
M-FOODS DAIRY TXCT, LLC
By:
-----------------------------------------
Name: John D. Reedy
Title: V.P. - Finance and C.F.O.
Acknowledged and agreed to as of the date first above written.
MICHAEL FOODS, INC.
By:
-----------------------------------------
Name: John D. Reedy
Title: E.V.P., C.F.O. and Treasurer
17
Accepted and agreed to as of the date first above written.
BANK OF AMERICA, N.A., as Agent
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
18
EXHIBIT 4(a)
to
Investor Pledge Agreement
dated as of April 10, 2001
in favor of Bank of America, N.A.
as Agent
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
to
the following shares of Capital Stock of ____________________, a _____________
corporation:
NO. OF SHARES CERTIFICATE NO.
------------- ---------------
and irrevocably appoints __________________________________ its agent and
attorney-in-fact to transfer all or any part of such Capital Stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for him.
The effectiveness of a transfer pursuant to this stock power shall be subject to
any and all transfer restrictions referenced on the face of the certificates
evidencing such interest or in the certificate of incorporation or bylaws of the
subject corporation, to the extent they may from time to time exist.
---------------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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SCHEDULE 5(f)
to
Investor Pledge Agreement
dated as of April 10, 2001
in favor of Bank of America, N.A.
as Agent
PLEDGED STOCK
NUMBER OF CERTIFICATE PERCENTAGE
ISSUER SHARES NUMBER OWNERSHIP
- ------ ------ ------ ---------
M-Foods Dairy, LLC
M-Foods Dairy TXCT, LLC
20